CC-BY-SA-2.0, FlickrPhoto: 一元 马 . Aberdeen Granted WFOE Licence, Signals Long-Term Ambition in China
China has granted Aberdeen Asset Management, the UK-based asset manager, a Wholly Foreign-Owned Enterprise (WFOE) business licence.
The announcement comes as UK Chancellor of the Exchequer, George Osborne, leads a trade delegation to China.
The licence, issued to a newly-created Aberdeen subsidiary by the Shanghai Administration for Industry & Commerce, Pilot Free Trade Zone Branch, will enable the company to set up an office there under the pilot Free Trade Zone.
Aberdeen has long wanted to expand its activities in China. The chief constraints have been access, control and manpower. The company has taken a gradual approach, having opened a representative office in 2007. That office has mainly performed liaison work.
Under the new venture, the plan is to add analysts to research local equities and business development staff. At present, Aberdeen does such research mainly from Hong Kong, preferring to do this in-house, and this will continue.
In the first stage asset-raising will focus on local institutions. The WFOE is based in the Free Trade Zone which brings further advantages.
Aberdeen stresses the importance of patience, however. It is not seeking quick returns but looking to build its presence step by step, mindful that, while liberalisation is good for the industry, opportunities are evolving fast.
That view is informed by the raft of new investment initiatives, which have included the likes of ‘Stock Connect’, the Hong Kong-China mutual recognition scheme for funds as well as the WFOE regime itself.
Photo: Arek Olek. Navigating The Storm: In Risk Budgeting and Alpha We Trust
The Lyxor Hedge Fund Index was down -2.7% in August. 1 out of 12 Lyxor Indices ended the month in positive territory. The Lyxor Convertible Arbitrage Index (+3.3%), the Lyxor L/S Equity Variable Bias Index (-0.7%), and the Lyxor L/S Equity Market Neutral Index (-1.1%) were the best performers.
The deflation and growth scares, which built up over the summer, accelerated following the CNY devaluation. They morphed into a vicious cycle in the last week of August. With volatility reaching 55 and equities plunging by the hour, Monday 24 will from now on count among the major stress episodes used as reference. The bulk of the Lyxor Hedge Fund index was endured during that week. Event Driven funds were the main losers. Return dispersion was elevated. Losses in some heavy-weight funds hid decent performances among macro traders (CTAs and Global Macro). A milder pressure on credit and govies supported credit and fixed income arbitrage strategies. The L/S Equity space proved resilient apart from Asian and US long bias managers.
“Beyond a possible near-term rally, we expect moderate and riskier returns from traditional assets. Thus, we continue to strengthen our focus on hedge funds’ relative value approaches.” says Jean-Marc Stenger, Chief Investment Officer for Alternative Investments at Lyxor AM.
To the notable exception of Asian and US long bias funds, the L/S Equity strategy was remarkably resilient. Most funds had steadily reduced their net exposures over the summer, cautiously positioned ahead of the sudden end-of-August debacle. In Europe, Variable bias managers implemented efficient hedging strategies, with an increased number of single shorts. European managers, which generally missed the reflation trade early this year, regained all the lost ground over the summer. They even outperformed market neutral strategies. In contrast, Lyxor Asian managers suffered in August, down -2% in aggregate. Their dramatic cut in net exposure since June (-10%) limited the damages. US Long Bias also took a major hit, losing most of their beta.
Event Driven funds were the main losers, with a severe plunge across the board. The aggregate Event Driven performance was close to flat before the last week of the month. Until then, some losses were recorded in China and Resources related exposures. They were offset by positive earnings releases in few large corporate situations and by the favorable closing of several M&A deals. The last week of August unsettled both merger spreads and the pricing of corporate situations, including activist positions. Special Situation underperformed Merger Arbitrage funds, even adjusted from their market beta. The sudden widening of deal spreads and the depressed valuation levels of corporate situations will probably open a phase of recovery going forward.
The Lyxor L/S Credit Arbitrage index was only down -1.5%. The market turmoil infected credit markets but less than equities. Spreads had already meaningfully widened over the recent months. This kept managers on a very cautious footing, positioned on high quality and high grade issues, with increased diversification. As dispersion returned in the space, short opportunities also emerged – and not only in the energy segment. In particular weakening cross credit correlations provided fixed income arbitrage funds with greater relative value opportunities. The alpha produced by Credit strategies alleviated the adverse beta contribution.
High dispersion among CTAs in August. CTAs were up nearly +1% before the last week of August. With their long bond and USD positions along with their short commodities exposures, they were well hedged against the various risks being priced in. In particular: a slower global growth, a slower Fed normalization and the Chinese ripple effects on EM countries and resources. During the last week, a majority of funds remained reasonably resilient. However some heavy weight funds were substantially hurt on their remaining long equity holdings and on some of their long USD crosses. ST models outperformed thanks to a faster portfolio repositioning. We observe that, in aggregate, LT models cut their about 30% net equity exposure down to less than 10% over that week.
Heterogeneous returns among Global Macro, with losses in heavy weights. Until the last week of August the strategy remained resilient, with a slightly positive MTD return. While cautiously exposed to risky assets, their hedges had little efficiency in the sell- off. They were essentially hit in their equity and long USD positions, with limited cushion from bonds or safe havens. However, losses in large macro funds actually hide a more heterogeneous and favorable picture. After the sell-off, Lyxor Global Macro funds were on average 10% net long on equities (from 15% early August), with more than half of their equity positions in Europe. They continue to play commodities mostly in relative value. Overall they remain long USD, especially against EUR and GBP.
Courtesy photo.. Hartwig Kos Joins SYZ Asset Management as Co-Head of the Multi-Asset Team
SYZ Asset Management, the institutional asset management division of the SYZ Group, has announced the appointment of Hartwig Kos as Co-Head of the Multi-Asset team. Hartwig Kos will co-manage the team with Fabrizio Quirighetti and also serve as Vice-CIO of SYZ Asset Management. He will take up his position on 15 October 2015.
Based in London, Hartwig Kos will contribute with his specific skills and experience in active allocation strategies to the team of 7 people in place and will take over the management of the OYSTER Multi-Asset Diversified fund as lead manager. For their part, Fabrizio Quirighetti and his team in Geneva will manage the OYSTER Multi-Asset Absolute Return EUR and OYSTER Absolute Return GBP and Fixed Income strategies.
Before joining SYZ Asset Management, Hartwig was a Director in the Global Multi Asset Group at Baring Asset Management, where he was responsible for managing the Baring Euro Dynamic Asset Allocation Fund. He was also the Co-Manager of the Baring Dynamic Emerging Market Fund. Moreover, Hartwig was a member of the Strategic Policy Group at Barings, the firm’s asset allocation committee. Hartwig holds a Ph.D. in Finance from Cass Business School in London and a degree in Economics and Business Administration from the University of Basel, Switzerland. Hartwig is also a CFA® charterholder.
The London office is one of SYZ Asset Management’s clusters of excellence and notably houses the European equities fund management and research team. An office was opened in Edinburgh in November 2014 to include additional European fund management and research capabilities and an expanded sales team.
Commenting on the appointment, Katia Coudray, CEO of SYZ Asset Management, said: “I am pleased to have hired Hartwig Kos. He is an investment professional who is highly respected by his peers and his renowned experience in active allocation management adds value to our fund management team.”
Hartwig Kos added: “SYZ Asset Management has an excellent reputation and a convincing track record in the competitive field of multi-asset management. I am delighted to be a part of this team and join a Group with a strong investment culture and a human dimension.”
Foto cedidaPhoto: geographie, Flickr, Creative Commons. Sareb Senior Executive Joins DebtX in Europe
DebtX, the largest marketplace for loans, has announced that Luis Martin, a Spanish banking executive with more than 25 years of financial services experience, has joined DebtX as a Senior Advisor in Europe.
Martin, a recognized leader in the Spanish banking and real estate community, will work with institutions to reposition their balance sheet and reduce non-performing loans. Most recently, Martin was a Member of the Board and the Head of Transactions at SAREB, Spain’s national bad bank. In that role, he had direct responsibility for over $30 billion of loan sales and executed most of the largest loan sales in Spain over the past two years.
“Luis Martin is a highly respected banking and real estate executive who brings extensive knowledge of the Spanish market, its key players, and the loan sale process,”said DebtX Managing Director Gifford West, head of DebtX’s international operations. “Luis deepens the DebtX team and expands its ability to serve financial institutions throughout Europe, where DebtX has been valuing and executing loan sales for the past eleven years.”
Previous to joining Sareb, Martin was Chairman and CEO of BNP Paribas’s real estate consulting firm in Spain. In this role, he had direct responsibilities on the servicing and property management of more than 7,000 residential units and 500,000 square meters of commercial properties. He participated in many real estate investment transactions exceeding more than €500 million and asset management responsibilities over more than €400 million through BNPP Real Estate Investment Management.
“As we enter the next phase of bank restructuring, Spanish banks will examine all of their non-performing and non-core positions with the goal of maximizing proceeds,” Martin said. “DebtX is best positioned to establish an efficient market for these loans and create liquidity and transparency for Spanish banks. Once these banks have removed these assets from their balance sheets, they will be positioned to originate more loans and drive the Spanish economy.”
DebtX is the largest secondary commercial and residential loan trading platform in Europe and the United States. DebtX works with banks and governments to create liquid markets for commercial and residential loans. Buyers of loans sold at DebtX include institutional investors around the world.
CC-BY-SA-2.0, FlickrPhoto: Chris Bullock, credit analyst at Henderson and co-manager on the Euro Corporate Bond Fund and Euro High Yield Bond Funds. . The High Yield Bond Market Has Trebled in Size in The Last 10 Years
High yield bonds have been a staple of US portfolios for more than thirty years, and the trends that have led to a large and well-developed US market are beginning to establish themselves elsewhere as companies increasingly turn to high yield bonds as a source of funding.
This growing global supply creates greater choice for investors at a time when demand for high yield bonds is also increasing because of the favourable risk/return and yield characteristics of the asset class.
High yield bonds are corporate bonds that carry a subinvestment grade credit rating. They are typically issued by companies with a higher risk of default, hence the higher yields. Henderson believe the following factors combine to make high yield bonds an attractive investment:
Growing and globalising market
High income in a low yield world
Low sensitivity to the interest rate cycle
Default rates expected to remain low
Significant opportunities for credit selection
A growing and globalising market
As the table shows, the high yield bond market has trebled in size in the last 10 years and, geographically, is becoming more diverse. “In part, this reflects a more confident and established market, as well as companies increasingly turning to the high yield bond market after banks cut back on lending following the financial crisis”, points out Chris Bullock, credit analyst at Henderson and co-manager on the Euro Corporate Bond Fund and Euro High Yield Bond Funds.
Today, the high yield market comprises a vast range of companies from household giants such as Tesco, Heinz and Telecom Italia through to small and medium-sized companies that are raising funding through bond markets for the first time. This creates an attractive and expanding mix of issuers that can reward strong credit analysis.
High income in a low yield world
High yield bonds continue to offer an attractive income pick-up.
Yields in many fixed income sub-asset classes are still close to historical lows despite recent rates market volatility. Yields have been driven by low global central bank rates combined with quantitative easing (QE). In the first half of 2015 alone, 33 central banks cut interest rates, while the ECB embarked on its €60bn-a-month quantitative easing programme.
From a risk-return perspective, high yield bonds are typically seen as occupying the space between investment grade bonds and equities. As the chart shows, over the last 15 years, high yield bonds have outperformed investment grade corporate bonds, government bonds and even equities, with less volatility than equities. The high income element in high yield bonds has been a valuable component of total return.
CC-BY-SA-2.0, Flickr. David Steyn Appointed as CEO and Chairman of the Management Board of Robeco
Robeco today announces the appointment of Mr. David Steyn (1959) as Chief Executive Officer and Chairman of the Management Board of Robeco Groep N.V. (‘Robeco’) as of 1 November 2015.
David Steyn has over 35 years of international experience in asset management, in management,distribution and investment roles. Previously David Steyn was in charge of strategy at Aberdeen Asset Management plc and chief operating officer and head of distribution at AllianceBernstein LP, based in London and New York. He studied law at the University of Aberdeen.
David Steyn, said: “I am honored to be given the opportunity to become part of an asset manager with such a strong heritage and reputation. I am looking forward to building Robeco further on a continuing path of excellence, meeting the evolving needs of clients around the world.”
Dick Verbeek, Chairman of the Supervisory Board, said: “The Supervisory Board has given positive advice to the shareholders, because we believe that David is an excellent candidate for CEO of Robeco to continue the growth path. I’m confident that we can count on David’s long and proven track record in asset management to lead Robeco and benefit from the opportunities that will arise in the global asset management market in the years to come. On behalf of the entire company, I would like to extend him a warm welcome.”
Makoto Inoue, President and Chief Executive Officer of ORIX Corporation and member of Robeco’s Supervisory Board, said: “I am delighted to welcome David Steyn to Robeco. I am convinced that together with the members of the Management Board and staff at Robeco he will be able to accelerate Robeco’s growth ambitions globally while continuing to deliver great results for clients.”
The appointment of David Steyn is subject to formal approval by the relevant Dutch authorities. Once the regulatory approval has been obtained, David Steyn will work closely together with Roderick Munsters, whose departure was announced earlier this month, to ensure a smooth transition.
Photo: Nicu Buculei
. Dividend: It Is Essential To Analyze The Long Term Sustainability To Avoid ‘Value Traps’
The case for equity income investing continues to strengthen. Worldwide, quoted companies paid out a record $1 trillion in dividends last year, according to the Henderson Global Dividend Index, a long-term study of global dividend trends. By investing globally, investors can gain exposure to a broader range of income opportunities and benefit from significant portfolio diversification.
Broadening opportunity set
Companies increasingly recognise the benefits of attracting investors by being able to demonstrate a strong and growing dividend policy. This is well established in Europe and the US but the dividend culture is now providing increased opportunities in regions such as Asia-Pacific and selected emerging markets. This broadening universe provides an attractive diversification opportunity for equity income investors.
Long-term outperformance
Studies indicate that dividends generate a significant proportion of the total returns from equities over time. The combination of reinvested income with potential capital growth has led to long-term outperformance of higher dividend paying companies compared to the wider equity market, as shown in the chart below.
A focus on cashflow is required in order for dividends to be sustained; dividends are therefore a strong indicator of the underlying health of the business.
Higher yielding shares by their nature tend to be more contrarian and out of favour thus offering revaluation opportunities.
Maintaining a healthy dividend stream imposes a disciplined approach on a company’s management team and can improve decision making.
Risk reduction – diversification benefits
As more companies globally pay dividends, the potential to diversify increases. Some markets suffer from high dividend concentration and as a result equity income strategies focused on single countries may become overly reliant on a low number of high-yielding companies that dominate the market. A global remit also maximises the opportunities at a sector level; for example, many high yielding technology companies can be accessed through investing in the US or Asia, but not the UK.
Key considerations
Look beyond the headline yield: High-yielding equities can be more risky than their lower-yielding counterparts, particularly after a period of strong market performance when equity price rises push yields down. The high-yielding companies that are left are often structurally-challenged businesses or companies with high payout ratios (distributing a high percentage of their earnings as dividends) that may not be sustainable. An investor simply focusing on yields, or gaining exposure through a passive product such as a high-yield index tracker fund, may end up owning a disproportionate percentage of these companies, often known as ‘value traps’. It is also worth noting that companies which cut their dividends tend to suffer poor capital performance as well. Therefore, it is essential to analyse the sustainability of a company’s ability to pay income.
Seasonality: A global approach offers equity investors diversification benefits and the opportunity to receive income from different sources throughout the year. Most regions show some dividend seasonality. European companies typically pay out more than three fifths of their annual total during the second quarter according to data within the Henderson Global Dividend Index. This is by far the region with the most concentrated dividend period. North America shows the least seasonality of any region with many firms making quarterly payments. UK firms also spread payments more smoothly than other parts of the world, although larger final dividends tend to be paid in the spring and summer following the annual general meeting season.
Dividend outlook: Overall, we are encouraged by the health of global companies generally, with strong balance sheets and disciplined management teams focused on generating good cashflow, which should be supportive for dividend growth in the long run.
Next week, Investec Asset Management shall have the pleasure of organizing the eighth edition of its global investment conference, Investec Global Insights 2015. The asset management company will gather 250 delegates from 23 countries worldwide in London, with the aim of providing its clients with the most complete and updated analysis for making their investment decisions.
After the last twelve months, during which the market has undergone some significant changes, the content of the conference is more relevant than ever. Attendees from the United States, Latin America, Europe, UK, Middle East, Africa, and Asia will have the opportunity to attend several ‘Meet the Portfolio Manager’ sessions and interact with peers from major fund buyers from all around the world.
This year, some of the featured presentations will focus on the following topics:
Is it still worth investing in emerging markets?
Are developed markets looking stretched?
When will rates rise and what will be the impact?
How do you find sustainable sources of income?
Outside the purely financial field, the conference will feature the starring presentation of Francois Pienaar, captain of the South Africa National Rugby Union team from 1993 to 1996. He will share his experiences, which led the team to win the Rugby World Cup in 1995. In Invictus, the film based on this feat directed by Clint Eastwood, Pienaar is played by Matt Damon.
Richard Garland, Investec’s Managing Director, will act as conductor of the event for the duration of the conference.
For further information on the event’s agenda please consult the attached document.
Javier Núñez de Villavicencio / Courtesy photo. Neuberger Berman Appoints Javier Nuñez de Villavicencio to Lead Business Development across Iberia
Neuberger Berman, one of the world’s leading private, employee-owned investment managers, announces the appointment of Javier Nunez de Villavicencio to lead its client relationship management and business development activities in Spain and Portugal, effective immediately. Based in Madrid, Javier reports to Dik van Lomwel, Head of EMEA and LatAm at Neuberger Berman.
Dik van Lomwel comments, “As we deepen and strengthen our client base in these key markets it is important to have experienced professionals with local expertise.Javier has been representing us for two years in an external capacity and we look forward to bringing him in-house.”
Javier has over 30 years’ experience including more than a decade spent at BNP Paribas Investment Partners in Madrid, where he was Head of Spain and Portugal. Previously Javier was at JP Morgan as Head of Equity Sales in Madrid and subsequently Head of International Equity Sales in New York.
On his appointment, Javier commented, “Being familiar with Neuberger Berman, I believe it offers a compelling proposition for the Iberian client-base who, like many at this time, seek higher yielding investment solutions whilst also preserving capital. Neuberger Berman’s broad platform across all asset classes puts the firm in a strong position to help clients achieve their investment objectives. I look forward to building on the momentum we have already achieved in the region.”
CC-BY-SA-2.0, FlickrPhoto: OTA fotos. Japan: Goodbye Deflation?
Shinzō Abe had ambitious plans following his re-election as Prime Minister of Japan in 2012. He was prepared to pull all the levers available to him, in the form of radical economic and reformist polices, to end Japan’s ‘lost decades’ of crippling deflation. While the success of his reformist policies might be up for debate, his monetary and fiscal stimulus plans have finally seen both inflation and the stock market moving in the right direction – upwards (see chart below). “Abe ‘gets it’: everything that can be done to end deflation and return to growth must be done. And the only way to dig yourself out of deflation is to aggressively inflate your way out of it”, writes the Japanese Equity Team at Henderson.
These policies have helped Japanese equities to become one of the best performing asset classes so far this year, albeit at the expense of a significantly weakened yen. One particular beneficiary has been financials, point out Henderson. In recent years the sector has been buoyed by banks finally writing-off legacy bad loans, leaving their balance sheets stronger than most of their developed world counterparts. In addition, the banks’ Tier 1 capital ratios have been buoyed by the surge in the equity market.
For most western banks, this capital tends to be held in low-risk fixed income assets, with a low percentage held in equities. However, in Japan a significant proportion is held in non-financial domestic equities. In a reflationary environment, this surge in equity shareholdings has bolstered the capital of banks, leaving them far more sufficiently capitalised to withstand any unforeseen shocks, while also being well positioned to benefit from any recovery in the domestic economy.
The road ahead
Longer term, financials are set to benefit from any rise in interest rates, which have remained ultra-low in Japan for decades. A rise – albeit likely a very small and gradual one – would allow banks to earn a higher net interest margin. That is, the margin on what can be earned from the lending activities of banks, versus what is paid to depositors, increases. However, this currently feels like a distant prospect, with markets not forecasting a rise in rates until the second half of 2016.
“In the meantime, we see opportunities in those domestically-orientated companies that are likely to benefit from a recovery in the economy. Most notably the service and retail sectors should benefit, following the lull induced by the 2014 consumption tax hike, which saw the tax on goods and services rise from 5% to 8%. Stocks we hold in these sectors include Rakuten, Japan’s leading ecommerce company, and Fujitsu. The latter has new management, which we hope will focus more on its highly cash-generative core IT service business”, explains the Japanese Equity Team.
“It is too early for Abe to claim economic victory. However, should he continue with his economic and reformist policies, we could finally see a return to something approaching ‘normality’, much to the relief of the country’s ever-patient investor base”, concludes.
